Are you fascinated by blockchain technologies and intrigued by their potential applications to healthcare? Have you been waiting for an article that will explain it all perfectly?

If so, this is not that article.

How quickly this technology might transform healthcare is evident in looking at the explosion in the number of Bitcoin transactions, from close to zero five years ago to now over a quarter of a million every day— and all this from a technology that didn’t exist before 2008.

So, what is blockchain?

A computer expert might blanch at the analogy, but imagine a blockchain as a huge leather-bound ledger that automatically records every transaction and is tamper-proof. Rather than being guarded by a solitary watchman who prevents fraudulent entries, the blockchain ledger is managed by its network of users, with an ongoing record of time-stamped transactions. Because one record affects all subsequent records, it is nearly impossible to go back and alter a prior record without detection. This aspect of a blockchain is its key defining feature. Since records cannot be altered, there is minimal risk of fraud and counterfeiting. Blockchain provides a tamper-proof distributed electronic record.

At least, that’s what the original generation of blockchain provided.

The second generation of blockchain adds function beyond record keeping and includes working code to affect operations once a record is processed. In this way, a blockchain ledger can become a self-effectuating instrument— a smart contract that takes action on the terms of the contract without requiring human intervention. Let’s say I want to send you something and then require that you pay men for the service or product delivered. Blockchain technology enables me to send you a self-effectuating contract that delivers payments to me once the delivery of a product or service to you is verified.

This kind of action and verified record are virtually limitless. In the legal system, blockchain provides a verified repository for multiple-signature contacts. In real estate, the archaic and costly process of paying agents to do title searches could be obviated by a verified blockchain— and then the even more expensive process of requiring attorneys to execute contracts could be replaced by a self-effectuating blockchain contract that automatically deposits funds once the title is transferred.

One of the last great bastions of labor-intensive human adjudication of transactions is in healthcare. Even after passage of the HITECH Act and other measures to encourage electronic records, the healthcare industry processes transactions incredibly inefficiently. Estimates are that there are still more than three billion transactions in healthcare processed manually. It is rightly considered to be a major sign of progress simply to submit these transactions electronically. According to CAQH, each instance of doing so would save healthcare providers $3—multiply that by three billion and you get serious money.

The possibilities blockchain offers to healthcare are getting people excited, including:

replacing manual adjudication with blockchain smart contracts that handle not only submissions of claims, but also their processing.

transforming pharmaceutical supply chains, not only by markedly increasing transaction efficiency but also by guarding against counterfeit medicines, and

making a patient’s medical records were encrypted, fully verified and completely portable.

This vision isn’t going to come into being tomorrow—but it may come sooner than we think. Already, blockchain technologies are beginning to replace human intervention in legal and financial transactions that were once considered impervious to automation. A future may one day exist where blockchain replaces insurance claims, medical records systems, hospital billing departments and much more. While no one can predict when that future will arrive, one thing is for sure: someone is going to make a ton of money figuring out how to process transactions in healthcare more efficiently than today—and established healthcare enterprises must adapt.

If this future seems far-fetched, remember that only two fundamental technologies (and their myriad adaptations) were the driving forces behind the communications revolution of the last few decades: TCP/IP, which allows computers to “talk” to one another; and HTTP, which allows communication around a distributed network. Many computer experts believe the impact of blockchain technology could be as profound as that of these two predecessors.

Policymakers need to be aware of this coming revolution and address questions of governance, ownership—and the impact of these changes on employment and healthcare equity. In an equitable healthcare system, at least some major fraction of the savings from adopting blockchain would be reinvested in lowering the cost of care or improving access.

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